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Corporate America prepares for graying shoppers, employees

WASHINGTON—Amid all the talk about changing Social Security, an equally important retirement issue is being overlooked. Millions of Americans are nearing retirement age, and there won't be enough younger workers to fill their shoes.

By 2010, one-third of the U.S. workforce will be older than 50, and American businesses will be depending on older workers not only to buy their products, but also to sell them.

"We will be fighting for labor in the next five or six years," predicted Bob Nardelli, chairman and CEO of Atlanta-based hardware giant Home Depot. "I think anybody that doesn't realize there is a war on for attracting labor is going to come up short."

Having older Americans work longer would help prevent the economy from weakening as they age and ease the financial crunch facing the Social Security system because working seniors would still contribute wage taxes and would withdraw less in benefits.

The population will only continue to age. Today, only 12 percent of Americans are older than 65, but that will rise to 20 percent in two decades. Then the population of the United States will look much like Florida's does today—heavy with seniors.

Home Depot participated last year in a pilot program with the AARP, the influential lobby for Americans 50 and older, which steered older workers to Home Depot from AARP field offices. Nardelli said he intends to hire older employees in direct proportion to their increase as a share of the population.

On Monday, the AARP launched a link from its Web site (www.AARP.org) that builds on its Home Depot experiment. The site matches AARP members with corporations looking to hire experienced older workers. Thirteen major U.S. corporations are participating initially, and hundreds more are expected to in time.

Companies seeking older workers are not doing it to be nice. To many, it's about maintaining a trained workforce and mirroring the public they sell to.

"Whenever our demographics can match up with a community, sales are better," said Dan Smith, senior vice president for the Borders Group Inc., a leading national bookseller.

Borders has an aggressive recruitment program that offers healthcare, dental and vision benefits to part-time employees working as little as one day a week. The bookseller is also developing what it calls a "passport" program that would allow an older worker to work summers in, say, Michigan or Ohio and winters in Florida or Arizona.

Recruiting older workers may sound counterintuitive because they pose higher healthcare costs to employers, but older workers have fewer dependents on their company-provided insurance and they offer other savings, too.

"For example, our over-50 employee turnover is 10 times less than those under 30," said Smith. "So when you think about the savings that you have in training costs, transition costs, recruitment costs, you save a lot more on that for the over-50 workers than you would for others."

Beginning in 2008, the first wave of baby boomers—those born from 1946-1964—will qualify for early Social Security retirement benefits. Boomer retirement should peak around 2030, when about 71 million Americans, or one-third of the U.S. adult population, will be collecting Social Security checks.

Unless that group is doing some work, the economy will suffer labor shortages, which probably means declining productivity, or output per hour. When productivity slows, so does economic growth. Technology may soften the blow, and so could immigration, but they're not likely to outweigh the declining workforce.

"If we don't encourage older workers, we're going to have a fall in our labor force participation rates," warned Richard Burkhauser, a specialist on retirement at Cornell University in Ithaca, N.Y. "Either people are going to have to work longer in their career jobs or work more regularly in part-time jobs, or we are going to have to do much more toward encouraging immigration."

The Government Accountability Office, a congressional watchdog agency, warned much the same in a February report on 21st century challenges.

"Given the projected slowdown in the growth of the nation's labor force, it is imperative that those who can work are supported in their efforts to do so," it said.

But the federal government rarely gets ahead of a trend.

"My fear is that there are so many issues that come before this, and I don't know how the government is going to find the time to make this a priority with pension reform, Social Security and training of the younger workers," said Jeffrey Garten, the dean of the Yale University School of Management, in an interview. "I think that the constituency for employing older workers is going to have to work real hard to get the government's attention."

Garten advocates a "national manpower policy" that recognizes the changing demographics and looks at ways to make it easier for companies to hire older workers. Right now, pension and health insurance issues often keep retired workers from working.

Complicated state and federal pension rules sometimes prevent companies from directly rehiring retirees, but they can hire them back through an employment agency. Public school teachers are often prohibited from being rehired even as substitute teachers, yet they can go to a "temp" agency and be placed as a substitute that way.

"That's just plain stupid," said Carl Camden, president and CEO of Kelly Services, a national temp firm based in Troy, Mich. He said federal pension rules must be revised with an eye toward flexibility for the graying workforce.

Many Americans retire at 65 because they're penalized on health care. Current law requires their employer to be the first payer on health claims, yet many older Americans would prefer the first payer to be Medicare, the less expensive federal insurance program for the elderly and disabled. Allowing them to keep working while being eligible for Medicare would be one incentive to keep older workers on the job.

Surveys show that nearly 80 percent of baby boomers expect to work in retirement. Last year the U.S. Department of Labor formed a special task force to define whom older workers are and what special employment needs they'll have.

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The AARP and 13 large U.S. corporations on Monday jointly announced a program to help older Americans stay in the workforce. The Workforce Initiative involves a link to AARP's Web site (www.aarp.org) where older workers can learn about "Featured Employers" and the jobs they have available, benefits and how to apply.

Participating "Featured Employers" are:

_Adecco

_Allied Barton Security Services

_Borders Group Inc.

_Express Personnel Services

_Johns Hopkins Health System

_Kelly Services

_Manpower Inc.

_MetLife Inc.

_Pitney Bowes

_Principal Financial Group

_The Home Depot

_Universal Health Services

_Walgreens

Source: AARP

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20050228 OLDER WORKERS.fh9

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